Housing Co-operatives: Building Resistance to the Market

by Jacob Stringer

Gentrification is often portrayed in the media as a process in which young, hip people move in to an area, improving its reputation for fun, shopping and culture. Writing in the Evening Standard Richard Godwin informs us that “it is youth culture that helped turn a place like Dalston, once an unassuming place of butchers and nail bars, into a creative furnace that it is today.” Leaving aside his assumptions about the creativity of those who have lived in Dalston for years, it is noteworthy that he refers to this influx as cultural rather than financial. Those not bewitched by the “creativity” of the new Dalston can easily spot the economic power at work: rising rents and property prices, squeezing out those with less money and breaking up communities in the process.

Local authorities, who we might imagine are worried about the increased difficulty of fulfilling their duties to house people, rather tend to welcome this influx of money with open arms. Perhaps they see increased employment opportunities, or perhaps they smell new developments in the offing, from which they can levy various ‘developer contributions’. Under the government’s new Business Rates Retention Scheme the incentive to welcome incoming businesses is to be deliberately increased: councils will get to keep half their own business rate receipts, previously redistributed by central government. So while local authorities more than anyone are aware of the welfare cuts and the rising food and energy bills hitting the poor, other incentives still drive them to take steps that will increase the cost of accommodation.

Developers and landlords naturally encourage the new money in order to cash in on rising property prices. Businesses that set up in gentrifying areas are hoping the increase in income can outstrip the rental increases they will see. And yes, some people who live in the area – particularly homeowners keen to see the price of their property rise – will benefit from this process. But anyone who rents in the private rented sector or who lives in social housing is likely to suffer increased poverty and even be forced out. The redevelopment of Elephant and Castle involved the emptying of the large Heygate Estate, once home to more than 3000 people. The destinations of former residents have been plotted by campaigners, showing dispersal into less central areas of London. Meanwhile rent rises in areas such as Hackney and Lambeth show rent levels rapidly catching up with more affluent West London boroughs.

Social housing could in theory offer resistance to this property-price and business-led gentrification but the combination of central government policy and Local Authority self-interest means this is not often the case. Campaigners suspect that one of the redevelopment options popular with local people at Elephant and Castle – a Community Land Trust to lock in affordable housing – was rejected because it would reduce land value available to the council. Council housing in a gentrifying area becomes so valuable that the chances of someone exercising the Right to Buy dramatically increase, and the chances of the property then being sold on to a landlord who wants to cash in on high rents are also high – London has been particularly afflicted by this problem, with a third of homes bought under Right to Buy now owned by landlords. In a recent article in the LRB James Meek, reminded us of what Right To Buy was and is: a state-subsidised privatisation program offering a huge subsidy to better-off tenants and excluding poorer tenants.

Meanwhile we only have to look at recent loss of social housing in Brixton, an area that has been hugely affected by rising property prices, to see that short-life housing co-ops, a form of Local Authority subsidised housing, as well as formerly-permitted squats, are not to be tolerated once the property reaches a certain value. The forms of housing that were once havens for the poor are now all under threat. The increased market pressure in these areas takes place while a housing crisis afflicts much of the UK. Resistance to rising rents, precarious housing and high-handed ‘decanting’ of tenants is also on the rise. Private tenant groups have been campaigning for controls on landlords and rents. But such campaigns cannot provide more housing in themselves. What are the other options?

There is a type of housing co-operative that can resist rising house prices and remain relatively untouched by the social cleansing effects of an ever-inflating housing market: self-owned, self-managed co-operatives in which members join by paying only a nominal share. This form of ownership, which grew out of the UK co-operative movement and became an established form here in the 1970s, can be set up in a single house or as larger co-ops with dozens of housing units. I benefit from living in this type of co-operative and a call to Brixton Housing Co-operative while writing this article confirmed that they too have not suffered the problems of other low-cost housing in the area. Since they hold the freeholds to their properties they are likely to continue going strong for the foreseeable future.

While the new target for social rents is 80% of market rates, in my housing co-op I pay closer to 50% of market rates and can expect this to improve as our mortgage is paid off. At the moment self-managed housing co-ops form a tiny percentage of the housing sector in the UK. But they have been shown to be a viable model of housing, with many advantages over both private and government-run housing. Political fashions have not yet created the environment for them to be built in large numbers, but perhaps now is their time.

Housing co-operatives have many benefits for residents, one of which is the ability to democratically participate in the living environment - in stark contrast to the lack of control in most rented accommodation or the investment-maximisation approach encouraged by private ownership. The home becomes a collective project rather than something borrowed or a site for increasing one’s wealth. In co-operatives people learn the skills necessary for collective self-management and in doing so often develop a strong sense of community.

A financially sound housing co-operative essentially puts itself beyond the reach of market mechanisms. Each one is committed by its own rules to provide housing for the members; the members control what happens inside it, including any changes to these rules. So a co-op cannot – except in rare cases in smaller co-ops– sell its assets to profit from rising property prices. This means that, crucially, housing can be thought of as somewhere to live rather than as an investment. Providing stable, affordable homes for the long term becomes the mission. While it is technically possible for a co-op to vote to move to a cheaper site in order to benefit from the sale, there are no documented examples of this. It seems that collectively people have chosen to stay in the place where they have established their lives. This may be due to the difficulty of making large decisions in big groups, but I suspect it is also because collective management encourages people to protect common goods – which means not just the physical properties but also the social worlds that develop.

The key to resisting the impact of the market is long-term collective ownership and one alternative to co-operatives are Community Land Trusts (CLT), controlled by and for the community. A form of land ownership imported from the United States during the Blair years, CLTs having been used in the US to create large-scale affordable housing such as Champlain Housing Trust, Burlington. Its primary purpose is to remove land from the market, managing it collectively for the community. An ‘asset lock’ on the land means that assets cannot be sold except to benefit the community. It is important to ensure that CLTs are democratic: they should be genuinely community-governed or it would be easy to imagine the idea of ‘community benefit’ being stretched beyond recognition by directors and trustees.

London’s first CLT, East London CLT, is only just starting up, and like other new urban CLTs around the country will probably use Housing Associations or private companies to manage homes. However it is possible for such land to be used entirely by a co-operative, through, for example, a 99-year lease. While this has not yet happened in the UK on a large scale, the example of Coin Street Community Builders, which constructed social co-operative housing on the South Bank in London, shows how large-scale housing co-operatives could be successful. While some are concerned that these initiatives could be used to undermine support for publicly owned housing, it is precisely because they are beyond the control of local authorities that it’s a good time to promote them: they are much more difficult for governments to attack than public housing. And due to the nature of collective ownership, they would be, like the Coin Street co-operative housing, immune from the Right to Buy.

How far can we go with rescuing land and people from the market using co-operatives? Could housing co-operatives help to protect whole communities and areas from the machinations of the markets and local authorities? Could they be a potential base for community organising, able to resist the break-up of communal solidarity that gentrification often entails? Cath from Cornerstone Housing Co-operative in Leeds points out that to really resist gentrification in an area you might need multiple co-ops. “If they are clustered that has an effect on the area,” she says. “You need a bit of a critical mass of social support.” She also suggests that unless co-ops celebrate their political raison d'être of promoting autonomous self-management, they can lose their collective character or fall into the hands of people who simply don’t care. Co-ops, she says, will always be a route for people who can’t afford to buy or rent in an area, but she thinks that just having cheap rent isn’t always enough to tie people together.

So can we imagine a situation in which people would see such housing as the norm, in which people began to see collective management of housing as a natural way to ensure good living space, and could live their whole lives protected from the market in this way? This could benefit those outside of co-operatives as well, since it would provide a workable example of housing that simply existed to house people. This could enable us all to assert our right to housing, putting political pressure on both the mortgage system and landlordism.

Mutual Home Ownership (MHO) is a recent innovation in this area, which gives residents more of a stake in their co-operatives. It is endorsed by the New Economics Foundation and promoted by the Co-operative Party as a model for social housing when allied with a CLT. Already used in other countries, the flagship MHO co-op in the UK is LILAC co-operative in Leeds. Unlike in a normal housing co-op, under MHOs, part of the tenant’s ‘rent’ money goes to building up equity that they can then withdraw when they leave. The value of individual equity is index-linked and, crucially, is linked not to the housing market but to income. At present the money that goes into a co-op mortgage can never be accessed again but a Mutual Home Ownership creates a different balance between individual and collective benefit. And while it could be argued that this is a compromise of the collective ideal, individuals still cannot make money from an MHO.

There are of course difficulties with the idea of co-op expansion. When it comes to starting one, there is no immunity from the market or from the current extended housing bubble that is holding sway in many areas, since market prices have to be paid for land or property (unless the co-op is state-subsidised). Further, most new non-subsidised co-ops are finding their initial rents closer to market rents because of the high cost of property. But this does not undo the advantages over the long term: since much of the rent goes to the mortgage, the rent will fall over time. As mortgages are paid off, wages rise and house prices rise in the surrounding area, the rents that look high now will fall, and so co-ops started today will eventually become, as those established in the 1970s are now, low-cost accommodation, immune from market pressures, the capital firmly locked in

In today’s political atmosphere, where local authorities view all land as an asset with value to be maximised and central government only wants to give out money as contracts to big corporations, this seems like a distant dream. But we are in urgent need of solutions to our housing crisis and the government failure to address it opens up opportunities to campaign for what we need. The co-ops of the 1970s were not set up and assisted because those in power wanted them, they were built because a grassroots movement made them happen. Coin Street Builders have shown that large scale co-operative social housing is still possible. There is no reason why we can’t have a such a movement again, with successful forebears now able to provide evidence of co-ops’ worth. Perhaps this time we can demand that it happen on an even larger scale, so that many more communities in the future can be protected from the whims of the market.

3 Comments on "Housing Co-operatives: Building Resistance to the Market"

George Mitchell, on 21 March 2014 - 22:38

Your link relating to the Community Land Trust proposals for Elephant & Castle/Heygate redevelopment is not working.
There is an alternative link with the story here: betterelephant.org/images/elephantlinksarticle.pdf

I want to set up a MHO housing co-op & a crowdfunder website to continually drive it, together with a structure designed to produce a rapid expansion of ‘cloned’ co-ops throughout the UK.

With sufficient drive behind it, I can see it could radically alter the entire rental market for the better & cut the legs off the rapaciousness of the private landlord rental market. It also has the potential to moderate the arrogance of mortgage providers & their disenfranchisement of older (un-mortgagable people) & people unable to save for deposits and people with ‘bad credit’ & the like.

BUT, I am astonished that my considerable efforts so far to find people interested have failed. Not only that but floating the idea on large and relevant websites has resulted in a torrent of stupidity, sarcasm & abuse and absolutely no interest from anyone wanting to join such a housing co-op.

It seems the UK is a country full of mindlessly self centred individuals who utterly fail to understand the benefits of getting together to co-operate for their own mutual benefit.

Presumably that is why the financial industry gets away with blue murder in terms of ripping everyone off - particularly with the banks deliberately lending about a third of all their lending to provide mortgages as a safe and more profitable lending stream for them, not caring that such an unnatural, excessive overabundance of money would drive up the cost of homes from about three times salary to the current level of about eleven times and make it completely unaffordable for everybody.

All hell is going to break out when interest rates eventually return to a ‘normal’ level of about 5%. !

Meanwhile - does anyone want to explore this idea further ?

Antony , on 03 March 2015 - 10:12

I’m interested In hearing more contact me dawes1038[at]msn.com

All comments are moderated, and should be respectful of other voices in the discussion. Comments may be edited or deleted at the moderator's discretion.